Umbrella Insurance for Rental Property: Why Is It Important?
If a guest or tenant is injured on your property, they could sue you to recover medical costs, financial loss, and other damages. A landlord liability policy can cover part of this risk, but it may not always be enough. You can extend your liability protection with umbrella insurance for rental property.
Introduction to Umbrella Policy for Rental Property
An umbrella policy provides extra liability protection above the coverage limits of underlying policies, such as landlord insurance. If a court awarded an injured tenant a certain amount in damages against you, your primary liability insurance would pay the claim to a specific limit. If the claim exceeded your primary coverage, an umbrella policy would cover the extra amount up to the policy limit.
Differences Between Umbrella Insurance Vs. Rental Property LLC
A rental property limited liability company (LLC) is one of the personal/business asset protection strategies available to real estate investors. If a tenant brought a personal injury lawsuit against you, your LLC would pay out any excess liability above your landlord policy’s limit. However, a claim can be significant enough to put your LLCs or personal assets at risk, sometimes forcing you to sell your rental property to pay up. The good thing with an umbrella policy is that it can cover you for the additional liability claims without putting your personal or investment property at risk.
How Does Umbrella Insurance for Rental Property Work?
Let’s assume you have a net worth of $500,000 and recently purchased a rental apartment for $250,000. Court orders you to pay $750,000 to a tenant injured on your property. You’re facing bankruptcy! Hypothetically, here’s how your rental property umbrella insurance might come to the rescue:
- Your landlord liability insurance pays $500,000 (the maximum coverage limit)
- Your umbrella policy pays $200,000 (the maximum limit)
- You pay $50,000 out of pocket (the deductible)
What is Covered Under Umbrella Insurance?
With an umbrella policy, you can cover your real estate investment portfolio across different states. Coverage includes landlord liabilities such as:
- Visitor/tenant injuries due to poor property maintenance
- Neighbor sues you for property damage that your tenant caused
- Failure to change locks on your property led to the break-in and theft of the current tenant’s property
- Lawsuit by a guest injured within your multifamily apartment common area
- Your personal injury attorney fees, including when not at fault
- Injury sustained by a settler in a vacant rental
What’s Not Covered Under Umbrella Insurance?
Umbrella insurance doesn’t cover items such as:
- Damage to your rental property
- When you cause intentional damage, such as by illegal forcible eviction of a tenant
- Your injuries
- A personal umbrella policy doesn’t cover property under an LLC (you need a commercial umbrella policy for this protection)
Find the Right Liability Protection for Landlords with Remland Insurance!
That’s how umbrella insurance for rental property can protect you against liabilities that exceed the value of your personal and business assets. To learn more about finding proper liability protection for landlords, contact us at Remland Insurance today. Our independent agents can help you customize insurance protection for your unique needs.